There's a lot to get your head around when you're starting to invest. Regardless of what you're investing in, be it shares, property or fixed interest there are a few key principles to remember.
We thought we'd discuss our top tips to consider when you're just starting out with investing:
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1. Diversify
You might've heard the saying don't put all your eggs in one basket. This certainly holds true, you should always spread your funds across different asset classes and sectors such as Shares, Property, Fixed Interest and Cash.
What this does is spread your risk out so that the ups and downs of each different investment balances out and the value of your total portfolio doesn't change dramatically day to day. You can think of diversification in terms of asset class as discussed above or more specifically within each asset class such as investing in shares in companies in different sectors like healthcare, retail or industrials, or if you're investing in property, different types of property like residential and commercial.
Diversification is out first and foremost tip, you should always consider your level of diversification and look to monitor it in the goods times as well as the not-so-good times.
2. Understand the risk scale
Investments in different asset class have different levels of risk, you should always know what you're putting your money into and what level of risk that investment carries with it.
We try to know as much about an investment and carefully analyse the risk/return relationship before taking any action, we encourage our clients to do the same. If you don't know what you're investing in that means you also don't know the risks involved. Generally speaking, with a higher degree of risk comes a higher return and vice versa.
In saying this, higher risk investments do not always lead to higher returns because the risk becomes too great, lower risk investments have also been seen to generate good, solid, long-term returns. Shares and property are normally considered higher on the risk scale than the likes of Cash and Term Deposits.
3. Think long term
Investment markets have their ups and downs, it's important to keep a straight head on and remember you're in this for the long game.
If you want to generate long term success from investing, then you need to keep a long-term mindset and mostly ignore the day to day movements of the market focusing on long term themes and investment ideas.
We often see that those who react to market news and have knee-jerk reactions to current affairs, end up making irrational investment decisions and forget why they were invested in the first place. As such, it's crucial to keep a long-term view in focus at all times.
More information
If you would like more information or are interested in getting started in investments, please feel free to contact the Morgans Toowoomba office on (07) 4639 1277.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.
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